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#2268086 - 03/23/22 02:13 PM Deposit ad with "free services package"
dtew Offline
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Joined: Apr 2021
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Our Marketing team is creating an ad flyer for a new Private Banking checking account with a free services package that includes free money orders, official checks, and stop payments. Should there be a disclosure of how many and how often this benefit can be used in the ad or would the statement "contact an employee for more information about terms and conditions" be enough on the ad?

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#2268092 - 03/23/22 03:00 PM Re: Deposit ad with "free services package" dtew
rlcarey Online
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rlcarey
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Galveston, TX
Really. In light of what the CFPB just released (snippet below)? And just who are these "Private Banking:" clients and what are their demographics? And why should they get free services?

The CFPB published an updated exam manual today for evaluating UDAAPs, which notes that discrimination may meet the criteria for “unfairness” by causing substantial harm to consumers that they cannot reasonably avoid, where that harm is not outweighed by countervailing benefits to consumers or competition. Consumers can be harmed by discrimination regardless of whether it is intentional. Discrimination can be unfair in cases where the conduct may also be covered by ECOA, as well as in instances where ECOA does not apply. For example, denying access to a checking account because the individual is of a particular race could be an unfair practice even in those instances where ECOA may not apply.

https://www.consumerfinance.gov/abo...fair-discrimination-in-consumer-finance/
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#2268094 - 03/23/22 03:14 PM Re: Deposit ad with "free services package" dtew
dtew Offline
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This product was designed for Private Banking professionals such as executives, physicians, and medical students with two years of verifiable income from the medical profession of $200,000 or greater, net worth, or retirement accounts.

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#2268100 - 03/23/22 03:45 PM Re: Deposit ad with "free services package" dtew
rlcarey Online
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Great - and you know that white medical professionals far outnumber minority medical professionals when based on population demographics.- right? Hence my point. Also, I am a black man that is not a medical professional and I make $250,000 a year, but I do not get this product because I never told you my income or you failed to ask. Where does that leave you?
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#2268103 - 03/23/22 03:49 PM Re: Deposit ad with "free services package" dtew
dtew Offline
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Ok thanks for your input. I will followup with Marketing.

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#2268109 - 03/23/22 04:08 PM Re: Deposit ad with "free services package" dtew
InFairness, CRCM Offline
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Originally Posted by dtew
This product was designed for Private Banking professionals such as executives, physicians, and medical students with two years of verifiable income from the medical profession of $200,000 or greater, net worth, or retirement accounts.

Has the bank completed an analysis that proves the revenue from these types of professionals is sufficiently greater than the revenue from other accountholders to justify the free services package? Have you evaluated the demographics and locations of Private Banking clients relative to other customers?
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#2268112 - 03/23/22 04:18 PM Re: Deposit ad with "free services package" dtew
ACBbank Offline
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We have Private Banking and we offer free and/or discounted services based on the business a client does with us (Balances kept, loans, etc.). I am not sure what type of analysis the PB's do behind the scenes but they know how profitable each client in that area is.
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#2268127 - 03/23/22 05:36 PM Re: Deposit ad with "free services package" ACBbank
rlcarey Online
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rlcarey
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Galveston, TX
Originally Posted by ACBbank
We have Private Banking and we offer free and/or discounted services based on the business a client does with us (Balances kept, loans, etc.).

So, that means once any customer of your bank qualifies, they are immediately moved to the Private Banking platform and offered these account discounts. And those customers that no longer qualify are removed from that offering, assuming some sort of grace period of course?
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#2268130 - 03/23/22 05:39 PM Re: Deposit ad with "free services package" dtew
ACBbank Offline
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Only if the customer chooses to be transferred to private banking. It's an option, which requires additional disclosures and some additional forms to be executed. But if they meet the requirements, they are offered our Private Banking services. Believe me when I tell you the only color our Private Bankers care about is green.
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#2268131 - 03/23/22 05:47 PM Re: Deposit ad with "free services package" dtew
rlcarey Online
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Yes - well when the CFPB gets through with their next review, they might be seeing nothing but "red". IMHO - This is the stuff that they are going to go after as if it is a witch hunt.
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#2268133 - 03/23/22 06:06 PM Re: Deposit ad with "free services package" dtew
ACBbank Offline
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I don't know about that Randy. We have regulators at my shop all of the time due to our asset size and the PB area has been unscathed for multiple years. I am far from an expert in this, but I don't see how it's an issue if we offer our services to anyone who meets the criteria and agrees to our T&C's.
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#2268134 - 03/23/22 06:53 PM Re: Deposit ad with "free services package" dtew
rlcarey Online
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That is because anti-discrimination scrutiny until last week was basically limited to lending. I think it is the dawn of a brave new world. But only time will tell.
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#2269217 - 04/18/22 12:20 PM Re: Deposit ad with "free services package" dtew
Noah Wiseman Offline
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Thanks Randy, these are great points and anyone that has a Private Banking product should be looking into. Your point is easily understood, it pretty much sounds like even though a Private Banking structure on the surface is neutral, what are the primary demographics of the customers that qualify and if it is primarily non-minority groups then the structure could be viewed as discriminatory (disparate impact). It sounds very similar to where you can not have a minimum loan amount without a quantifiable justifiable business purpose because that minimum loan amount (or in this case minimum income or occupation) could arbitrarily exclude a high volume of the minority population. Thanks for your information on this.

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#2269228 - 04/18/22 02:06 PM Re: Deposit ad with "free services package" dtew
Rocky P Offline
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Florida
Noah, piggybacking on Randy's remarks about the CFPB, the following is from an OCC Fair Lending Examination Booklet on Marketing. Ignore the loan part and think of the overall bank and services. long read :-(

Indicators of potential DISPARATE TREATMENT IN MARKETING of residential products, such as:
M1 Advertising patterns or practices that a reasonable person would believe indicate prohibited basis customers are less desirable.
M2 Advertising only in media serving particular racial or national origin areas of the market.
M3 Marketing through brokers or other agents that the bank knows (or has reason to know) would serve only one racial or national origin group in the market.
M4 Use of marketing programs or procedures for residential loan products that exclude one or more regions or geographies within the bank’s assessment or marketing area that have significantly higher percentages of residents of a particular racial or national origin group than does the remainder of the assessment or marketing area.
M5 Using mailing or other distribution lists or other marketing techniques for pre-screened or other offerings of residential loan products that exclude:
– Explicitly groups of prospective borrowers on a prohibited basis; or
– Geographies (e.g., census tracts and ZIP codes) within the bank’s marketing area that have significantly higher percentages of residents of a particular racial or national origin group than does the remainder of the marketing area.
M6 *Proportion of monitored prohibited basis applicants is significantly lower than that group’s representation in the total population of the market area.
M7 Consumer complaints alleging discrimination in advertising or marketing loans.

In addition, the following are lending practices that may involve violations of fair lending laws and that the OCC treats as risk factors:
Targeting persons, such as the elderly, women, minorities, and persons living in low- or moderate-income areas, who are perceived to be less financially sophisticated or otherwise vulnerable to abusive loan practices;
Aggressive marketing tactics that amount to deceptive or coercive conduct.

Disparate impact has been referred to more commonly by the OCC as “disproportionate adverse impact.” It is also referred to as the “effects test.”

Disparate Impact
When a bank applies a racially or otherwise neutral policy or practice equally to all credit applicants, but the policy or practice disproportionately excludes or burdens certain persons on a prohibited basis, the policy or practice is described as having a “disparate impact.”2

The fact that a policy or practice creates a disparity on a prohibited basis is not by itself proof of a violation. When the OCC finds that a bank’s policy or practice has a disparate impact, the OCC seeks to determine whether the policy or practice is justified by “business necessity.” The justification must be manifest and may not be hypothetical or speculative. Factors that may be relevant to the justification could include cost and profitability. Even if a policy or practice that has a disparate impact on a prohibited basis can be justified by business necessity, it still may be found to be in violation if an alternative policy or practice could serve the same purpose with less discriminatory effect. Finally, evidence of discriminatory intent is not necessary to establish that a bank’s adoption or implementation of a policy or practice that has a disparate impact is in violation of the FH Act or ECOA.
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